The Government today cleared a proposal for follow-on public offering of state-run Power Grid Corporation of India Ltd to raise about Rs 7,500 crore. "The 17 per cent follow-on public offer of Power Grid has been cleared. This includes 13 per cent fresh equity and 4 per cent stake sale by the government," Power Minister Jyotiraditya Scindia said after the Cabinet Committee on Economic Affairs (CCEA) meeting.

The follow-on public offering (FPO) will comprise 13 per cent fresh equity by the public sector company and 4 per cent stake sale by the central government.

The government will sell 18.51 crore shares in the public sector company. The company will issue fresh 60.18 crore shares through the offer. Out of this fresh shares, about 2.4 per cent would be reserved for the employees.

At current market valuations, the FPO is likely to fetch close to Rs 7,500 crore.

Post-FPO, the government stake in the company will come down to 57.89 per cent from current shareholding of 69.42 per cent.

The company may garner close to Rs 5,700 crore while the government will get an estimated Rs 1,700 crore.

According to sources, Citigroup, ICICI Securities, UBS, SBI Caps and Kotak Mahindra have been appointed as the merchant bankers for the FPO.

This would be the second follow-on offering from Power Grid, which sold a 10 per cent stake along with a similar stake divested by the government in November 2010 at an issue price of Rs 90 a share.

The company hit the capital market with its initial public offering in October 2007.

Shares of the company closed at Rs 95.10 apiece, down 1.19 per cent on the BSE.